I can't believe I didn't see this post earlier!!!! I think I know exactly what is wrong.

Lets cover the basics:
Your skimmer is sitting in way too much water. The water level is much too high. Here is a cruddy video of my euroreef. http://www.youtube.com/watch?v=g88VZGZv6dg The water level is EXACTLY 7 7/8 inches. I just tested my skimmer for you, at the water level yours is at (according the the picture), and it did some wacky things, but nothing drastic. But that is absolutely a necessity to keep the water level correct.
Next: From the picture, this is definatly the problem. Do you see your water outlet? The tube that comes out from the bottom of the skimmer? I am sure you know this, but this part is adjustable. It can be slid up or down. Make sure it is ALL THE WAY DOWN!!!!!!!
Next: In the last 7 days, have you added any kind of chemical?? The skimmer is most sensitive to chlorine remover. I added it in the past, and my skimmer did EXACTLY what yours is doing right now. It went bazurk.

I hope this helps. PM me if none of these works.